Meng Wanzhou, the chief financial officer of Chinese technology giant Huawei, the world's second-largest smartphone maker, faces allegations of hiding her company's links to a firm that looked to sell products to Iran in defiance of sanctions and conspiring to defraud banks, a Canadian court was told by prosecutors.
Ms Meng, the daughter of Huawei founder Ren Zhengfei, awaits extradition to the US and may face as much as 30 years in jail if convicted. On Friday Canadian prosecutors at a court in Vancouver argued she posed a flight risk and should not be granted bail as she awaits extradition to the US.
The US case against Ms Meng alleges that Huawei used Hong Kong-based Skycom, which had a presence in Tehran, to do business in the country violating sanctions. Ms Meng is said to have concealed and misrepresented links between Huawei and Skycom from banks, implicating them in the violation of US and European sanctions as they cleared transactions for Huawei.
Ms Meng was arrested on December 1 as she transited through Vancouver on her way to Mexico, coinciding with US president Donald Trump's meeting his Chinese counterpart Xi Jinping at the G20 summit in Argentina that culminated in a temporary detente to the trade war between the world's two largest economies. China has condemned the detention of Ms Meng denying she had violated Chinese or US laws while Huawei said it "has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms Meng."
News of her detention rattled markets on Thursday and Friday. Hong Kong-listed shares in ZTE fell 6.1 per cent on Thursday before recovering 0.5 per cent the following day. AAC Technologies fell about 8 per cent over the two days of trading, Sunny Optical shed about 9 per cent as China’s CSI 300 index of major Shanghai and Shenzhen-listed companies fell more than 2 per cent. Hong Kong's Hang Seng continued the decline on Friday dropping 0.35 per cent after shedding 2.5 per cent the previous day.
"China and the US continue to have frosty relations and this has seen investors prefer to stay away than get involved in what has proven to be a volatile market for quite some time now," said Mihir Kapadia – CEO and Founder of Sun Global Investments. "This reversed the hope felt earlier in the week after it was announced the US would delay tariffs on China in the aim of making progress but it is now clear that this negativity will last until the new year.”
The arrest did little to quell nervous investors on Friday. Spooked by the prospect of escalating tensions between Beijing and Washington, a wave of selling sent the Dow Jones Industrial Average down more than 550 points, the gauge's third weekly decline in four weeks.
"I think it [the arrest] has certainly come at a bad time and it will undo any goodwill coming out of G20 agreement between Trump and Jinping," said Cailin Birch, global commodities analyst at the Economist Intelligence Unit in London. The "fact of the matter is that [the] Trump administration has regularly done this kind of two-step process where they are calling (other nations) for dialogue and at the same time cracking down on firms and other areas. So a lot of mix messages are coming out of the Tump administration."
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Read more:
Arrest of Huawei executive 'could be a prelude to stern action' say analysts
Huawei CFO arrest outrages China and rattles markets
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The world's largest telecom supplier and other Chinese technology companies have been on the defensive because of allegations about a backdoor in their equipment that facilitates industrial espionage.
On Friday, Shenzhen-based Huawei agreed to take steps to mollify British concerns regarding security fears related to its equipment to avoid a ban from taking part in the UK's 5G mobile network plans. The measures taken by Hauwei follow Australia and New Zealand banning the Chinese company from providing 5G technology for wireless networks.
Japan plans to ban government use of telecoms products made by Huawei and ZTE on concerns they pose a national security risk, Japan's Yomiuri Shimbun newspaper reported on Friday.